Rabu, 19 Februari 2014

Rupiah’s World-Beating Rally Faces Trade Hurdle: Market Reversal

Feb. 18 (Bloomberg) -- Indonesia’s rupiah is set to snap its
world-beating gains of the past week, trading patterns suggest, amid
concern a clampdown on commodity exports will swing the nation’s trade
balance back to the red.

The currency strengthened 3.3 percent
in the five days through yesterday to 11,785 per dollar, sending a
measure known as its 14-day relative-strength index to 24, the lowest
since May 2011. Readings below 30 indicate a turnaround is likely. The
rupiah also breached its Bollinger band as it climbed to a three-month
high this week, adding to signs the rally may be overstretched.

December’s trade surplus was the biggest in more than two years and
helped rein in a current-account deficit that spurred an exodus of funds
from Indonesian assets in 2013, when the currency sank 21 percent. The
nation banned shipments of unprocessed ore last month to encourage
investment in smelters and refineries, a policy that Nomura Holdings
Inc. and Bank of Tokyo-Mitsubishi UFJ Ltd. say led to front-loading of
exports that distorted trade figures toward the end of last year.

“There’s very little room for the rupiah to gain because it has already
strengthened so much,” Leong Sook Mei, the Southeast Asia head of
global markets research at Bank of Tokyo-Mitsubishi in Singapore, said
in an interview. “The quality of Indonesia’s current-account improvement
remains suspect. And of course we still have electoral risk.”

A legislative election is scheduled for April and Indonesians will vote
again in July to choose a successor to President Susilo Bambang
Yudhoyono, who has led the country since 2004. Joko Widodo, the
reform-minded Jakarta governor who is leading in opinion polls, has yet
to secure his party’s nomination to run.

Asset Inflows

The rupiah rose as much as 1.4 percent to a three-month high of 11,658
yesterday, according to prices from local banks compiled by Bloomberg.
The currency fell 0.5 percent to 11,844 per dollar in Jakarta today,
while one-month non-deliverable forwards dropped 0.5 percent to 11,740.

Indonesia’s current-account deficit shrank to 1.98 percent of gross
domestic product in the fourth quarter, from 3.8 percent in the previous
period, the central bank said Feb. 13.

The gains in the
Indonesian exchange rate in the five days through yesterday were the
most among some 150 currencies tracked by Bloomberg. Overseas investors
have pumped $1.2 billion into the country’s stocks and local-currency
bonds this year on the improving economic data.

The country
posted a $1.5-billion trade surplus for December on Feb. 3 as exports
rose 10.3 percent from a year earlier, more than the median estimate in a
Bloomberg survey, which saw a 1.7 percent increase.

Fair Value

Bank Indonesia raised its benchmark interest rate by 1.75 percentage
points last year to slow the economy and rein in the current-account
shortfall, which ballooned to a record 4.4 percent in the second
quarter. The central bank said last week the deficit in the broadest
measure of trade would probably be 2.5 percent this year, from 3.26
percent in 2013.

“Because of the front-loading of the ore
exports, we don’t think the trade surplus will continue in the first
quarter and beyond,” Enrico Tanuwidjaja, a Singapore-based economist at
Nomura, said in a phone interview yesterday.

Goldman Sachs
Group Inc. estimates “fair value” for the rupiah at around 11,800 per
dollar, Singapore-based analyst Mark Tan wrote in a Feb. 12 note. The
U.S. bank had forecast the currency to reach that level in 12 months.

A gauge of expected fluctuations in the rupiah is the highest among its
Southeast Asian peers. Three-month implied volatility rose 10 basis
points, or 0.1 percentage point, to 11.41 percent today. That compares
with 7.23 percent for Malaysia’s ringgit and 6.6 percent for Thailand’s
baht.

‘High’ Volatility

“Volatility in the rupiah
could still be high in the first half,” Dian Ayu Yustina, a
Jakarta-based economist at PT Bank Danamon, majority-owned by
Singapore’s Temasek Holdings Pte, said in an interview yesterday. “We’re
still cautious on the rupiah because the trade surplus could have been
distorted.”

After the rupiah’s daily trading range breached
the lower end of its Bollinger band in October and the relative-strength
index fell past the 30 threshold, the rupiah weakened from that month’s
high of 10,930 to a five-year low of 12,285 on Jan. 7.

Developed by John Bollinger in the 1980s, the bands are used by
technical analysts to identify the turning point in an asset’s
trajectory. The limits represent two standard deviations from the 20-day
moving average, implying that the likelihood of a currency moving
outside the band is small.

The rupiah may weaken to around 12,000 per dollar in
the short term and trade in a range of 11,500 to 12,000 over the next
three months or so, said Koji Fukaya, chief executive officer and
currency strategist at FPG Securities Co. in Tokyo.

“I
wouldn’t be surprised if the rupiah sees some correction from quite a
sharp rally,” he said in a phone interview from Tokyo. “It may be
stabilizing overall, but there needs to be technical corrections from
time to time.”